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Shareholder Disputes and Divorce

Mar 03, 2022   ·   6 minute read

It’s bad enough to separate or divorce but even harder to going through a shareholder dispute as well. Northwest divorce financial settlement solicitors recognise that if you are in business with your husband or wife you may be facing a shareholder dispute in addition to court proceedings over your family law financial settlement.

In this article, divorce and financial settlement solicitor, Robin Charrot answers your questions on shareholder disputes with your former partner when you are going through divorce proceedings and trying to reach a financial agreement over how your family assets are divided.

For expert Divorce and Financial Settlement advice call our team of specialist divorce lawyers or complete our online enquiry form.

Your divorce shareholder dispute questions answered on:

  • Are business assets relevant to divorce proceedings?
  • What happens when spouses are shareholders in a family business?
  • Can a divorced couple agree to continue in business together?
  • Can I ringfence business assets so they aren’t relevant to divorce proceedings?
  • Role of a shareholder agreement in divorce proceedings
  • Valuing a business in a shareholder dispute or divorce proceedings

Are business assets relevant to divorce proceedings?

Business assets are potentially relevant to divorce proceedings and will need to be disclosed as part of your financial disclosure. That’s the case whatever the length of your marriage. However, when the family court makes a financial court order the family law judge will take a range of factors into account, including your respective needs, the length of your marriage and whether you owned the family business before your marriage. The weight given to these and other factors will depend on your personal and financial circumstances.

Business assets are relevant to divorce proceedings if you are a shareholder or a partner in a business or sole trader. The fact that your husband or wife or civil partner has played no role in the business doesn’t mean that the family court won’t say that your business is a family asset. Even if the court concludes your business isn’t a family asset, in the divorce proceedings a court can still use the value of a non-family asset in the financial settlement where there is a need to share non-family assets to meet needs.

It’s best to not get too tied up into arguing over whether your business is a family asset or not and instead take get some expert help on the likely overall financial settlement and on how the impact of the financial settlement on the business can be minimised.

What happens when spouses are shareholders in a family business?

If you and your husband or wife are both shareholders in a family business then you need to make sure both corporate and family law is followed. Divorce financial settlement solicitors say family law trumps company or corporate law because even if company law says your husband or wife owns fifty percent of the business, in the divorce financial settlement proceedings the family court has the power to order the sale or transfer of shares.

If you are getting divorced and you are in business together it can be particularly tough when you both work in the same environment. It’s best to try and keep business and private stuff separate, if you can, so the business isn’t affected by your separation as it’s unlikely to be in either of your interests for the business to suffer because you are struggling to work together until a financial settlement is reached.

If you can’t work together, even on a temporary basis, then you need to look at whether one of you working from home or other strategies can help you both remain in the business whilst you sort out the divorce financial settlement.

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Can a divorced couple agree to continue in business together?

A divorcing couple can decide to remain in business together after their divorce. A financial court order should set out post-divorce ownership of the business and a shareholder agreement should be drawn up so there is agreed procedure on important points, such as dividend policies or share voting rights.

Can I ringfence business assets so they aren’t relevant to divorce proceedings?

You can try to ringfence your business assets so they aren’t relevant to the divorce proceedings by either signing a prenuptial agreement or postnuptial agreement. The weight given to this type of agreement will depend on a variety of factors, including whether there was financial disclosure as part of the prenuptial agreement or postnuptial agreement process.

Role of a shareholder agreement in divorce proceedings

The fact that you have a shareholder agreement that says your husband or wife must transfer their shares to you for one pound if you separate or divorce doesn’t mean that your spouse won’t get a fair financial settlement or even a share in the value of the business assets. However, it is still sensible to have a shareholder agreement but it’s important to understand it won’t totally protect you from business related financial claims on divorce.

Valuing a business in a shareholder dispute or divorce proceedings

Valuing a business in a shareholder dispute or financial settlement divorce proceedings normally involves a valuation by a forensic accountant so there is an accurate assessment of the share value, the net value after tax, and the potential income stream if you continue to hold shares in the business. The fact that a family court orders a valuation doesn’t mean that the court will order that the shares are sold but the court will want to know the net value of the shares so the court has an idea of the total extent of the family assets and any non-family assets. The court can then use that information to make a financial court order, after having weighed up all the statutory factors to reach what the court considers is a fair financial settlement.

For expert Divorce and Financial Settlement advice call our team of specialist divorce lawyers or complete our online enquiry form.